Perhaps you’ve heard about the big settlement last year between merchants and credit card issuers regarding interchange fees. Those are the “swipe” fees that merchants have to pay in order to process credit card payments. Not only did this settlement determine that merchants will receive a $7.2 billion payment for past interchange fees and a temporary reduction in those fees, but it was also decided that merchants may now legally add a checkout fee — paid by the customer — to credit card transactions.
Having to pay 1.5% to 4% of each transaction for the convenience of credit could be a tough pill to swallow.
Here’s a breakdown of what you need to know about checkout fees:
The Fee Won’t Take You By Surprise
While merchants have the right to charge this fee, they also must disclose that they’re doing so. In stores, you’ll likely see a notification either at the front door or on the register. Online, the business will generally disclose the fee on the homepage.
In addition, it’s important to remember that the retailer isn’t charging this fee in order to make a profit. They’re simply passing the cost of their interchange fee along to the consumer. They may only charge the same amount that the credit card network charges them for each swipe.
The Fee Doesn’t Affect Debit or Prepaid Cards
Though using your debit card may feel almost identical to using a credit card, they’re treated differently when it comes to swipe fees. According to Janna Herron of Bankrate, “even if the retailer runs a debit card as ‘credit,’ the credit card surcharge doesn’t apply to you.” So you should feel perfectly comfortable using your debit card for any purchase.
Rewards Cards Might Be Affected
Credit cards that offer cash back or airline mile rewards often have the highest interchange fees, which helps to offset the banks’ costs in offering the rewards. There’s some speculation that issuers might scale back their offered rewards in order to offset the costs of losing those high interchange fees.
However, it’s important to note that rewards cards tend to have higher interest rates, and most issuers can count on cardholders carrying balances on their rewards cards. So it’s not as if seeing their interchange fees reduced will make the profits completely dry up.
Since banks rarely accept even a minimal loss of profit without a fuss, rewards cardholders should probably prepare for an increase in annual card fees or slightly higher interest rates.
American Express Isn’t Included
Finally, it’s important to note that last summer’s settlement was for Visa and MasterCard, and didn’t include American Express — which just happens to charge the highest interchange fees of the bunch. So if a retailer accepts AmEx (and now you know why many don’t), they can’t legally charge a checkout fee for that card.
The Bottom Line
Adding a fee to something that used to be free is often the quickest way to anger a loyal customer. Because of that, it seems unlikely that we’ll be paying checkout fees everywhere we shop, even though they’re now legal.
Have you experienced the new checkout fees anywhere? How do you feel about them?